Unraveling Medicare: A look at Medicare Avantage plans

February 6, 2006

As Medicare Part D gets under way, attention has largely focused on the prescription drug benefits offered through stand-alone prescription drug plans, or PDPs. Medicare Advantage prescription drug plans (MA-PDPs) are an alternative that could provide seniors an opportunity to save on premiums and co-pays for hospital and doctor fees in addition to gaining a prescription drug benefit.

Medicare Advantage emerges from the Medicare+Choice program that was created as a private-sector, managed care alternative to traditional government-directed, fee-for-service (FFS) Medicare.

The net result of the legislative changes is an opportunity for MA plans to offer more generous coverage and in more parts of the country. CMS estimates that 99.6% of beneficiaries will have some MA option in 2006 from more than twice the number of plans than were available in 2005.

As of November 2005, there were 459 MA plans approved for Medicare participation. The types of plans include HMOs, PPOs, private FFS plans, medical savings account (MSA) plans, regional PPOs, and special needs plans (SNPs). A beneficiary must be eligible for Medicare Part A and enrolled in Part B in order to select an MA option.

Medicare Advantage plans with the exception of MSA and private FFS plans must offer at least one benefit package that includes prescription drug coverage in each area they serve. In total, CMS estimates that 73% of persons with Medicare will have access to an MA plan that charges no premium in addition to the Part B premium and has a zero premium for the Part D benefit. MA plans with a zero drug premium will be available in 44 states.

MA plans offer more comprehensive coverage and lower out-of-pocket costs than traditional Medicare. This is an appealing option for seniors who are willing to switch to a managed care plan. MA enrollees have the same rights and protections as persons in traditional Medicare, including the right to appeal if services are denied, file complaints, and participate in treatment decisions. Medicare beneficiaries are assured that if they enroll in an MA plan, they may change plans or return to traditional Medicare during the annual open enrollment period.

Analysts expect that the number enrolled in MA plans will increase by one million people in 2006, up from the five million enrolled in MA in 2005. The Bush Administration goal is to double MA enrollment to 12 million by the end of the decade, covering approximately one-quarter of the Medicare population. The key to meeting this goal is the degree to which seniors are willing to select MA plans and accept greater restrictions in return for enhanced benefits and lower cost-sharing.

Medicare beneficiaries must choose from among a significant number of plans and plan sponsors. The choices vary considerably in pricing and coverage options. Four factors seniors are advised to consider in choosing between an MA-PDP and a stand-alone PDP are accessibility of doctors and hospital networks, the importance of additional benefits, cost, and reputation for quality.

Pharmacists will notice an update of MA plans through increased numbers of prescriptions for seniors that are covered by local MA plans as well as offerings from nationally prominent plans including Aetna, Coventry, Health Net, Humana, PacifiCare, United Health, and WellPoint.

THE AUTHOR is associate professor, Department of Pharmacy Health Care Administration, University of Florida College of Pharmacy.